A major aim of financial information is to provide inputs for decision‐making. Accounting can be described as the information system which identifies, records, and communicates the financial activity of an entity to others. The users of accounting information are easily separated into two groups: internal users and external users. Respond to the following in a minimum of 175 words: Discuss who are the internal users and external users of accounting information. Discuss what the primary concerns are to both groups.

Internal and External Accounting Information Users

Accounting supplies executives and owners with crucial financial information that is significant for decision-making and the external accounting users are also referred to as managerial accounting. Therefore, the internal users of accounting data engage people who operates, controls and runs the daily operations of the inside area of an institution (Patel, 2015). Internal users of accounting include directors, managers, officers, and employees. Some of the ways internal users engage accounting data include evaluating how the management has carried out its responsibility for safeguarding and managing the company’s resources. On the other hand, external users are those people who take an interest in the account data of an institution; however, they are not part of the institution’s administrative procedure. External consumers include creditors, government together with trading partners and they typically have a direct or indirect attention in the accounting data. Investors are creditors are the most common example of external users among several other external users.

Primary Concerns

The critical concern for external accounting users includes the fact that they must only use financial accounting data while internal users utilize a mix of management and financial accounting data (Libby, 2017). Management in internal users applies accounting data for scrutinizing and evaluating business’s financial performance together with the position, to take crucial decision and the needed actions aimed at enhancing the general business performance in terms of cash flows, profitability, and financial status. External users such as investors are expected to utilize the information in knowing how their funds are being used by the administration and the anticipated performance of the business in the coming days in terms of profitability and growth. Therefore, these are the general information regarding the internal and external users of accounting data in business operations.

References

Libby, R. (2017). Accounting and human information processing. In The Routledge Companion to Behavioural Accounting Research (pp. 42-54). Routledge.

Patel, F. (2015). Effects of accounting information system on organizational profitability. International Journal of Research and Analytical Reviews, 2(1), 168-174.